Geopolitical Worries Seen Boosting Prices
(Kitco News) - Participants in the Kitco News weekly gold survey look for gold to build upon this week’s gains, helped in large part by geopolitical tensions but also technical-chart support.
Gold surged midweek as the market factored in potential U.S. military action in Syria, before later pulling back.
Sixteen market professionals took part in the weekly survey. Eleven respondents, or 69%, called for gold prices to rise over the next week. Another three voters, or 19%, looked for gold to fall, while two, or 13%, see a sideways market.
Meanwhile, 2,142 voters responded in an online Main Street survey, the most since mid-January. A total of 1,764 respondents, or 82%, predicted that gold prices would be higher in a week. Another 267 voters, or 12%, said gold will fall, while 111, or 5%, see a sideways market.
For the trading week now winding down, 57% of Wall Street voters and 47% of Main Street voters were bullish. They were right as of 11:01 a.m. EDT, as Comex June gold was up 0.9 % for the week so far to $1,348.40 an ounce, although down from Wednesday’s $1,369.40 peak, which was the highest price since late January.
“These dips are going to provide buying opportunities,” said Sean Lusk, director of commercial hedging with Walsh Trading. “It’s very headline-driven, though.”
Jim Wyckoff, senior technical analyst with Kitco, said “higher on likely rise in geopolitical tensions.”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, and
Adam Button, managing director of ForexLive, said the same, in particular citing worries about potential military action surrounding Syria.
“The Syria issue is not over by any means, and there is a risk of a direct military confrontation between the U.S. and Russia, which would have enormous consequences,” Day said. “Moreover, Washington remains in turmoil and monetary factors continue to be favorable.”
Added Button: “Gold is a trade about bombs dropping right now. [U.S. President Donald] Trump has delayed the strikes on Syria but they’re inevitable sometime in the weeks ahead.”
A Kitco reader from Florida named Max offered a similar view. He said, “Geopolitics are back after chemical weapons were used on civilians in Syria earlier this week. This event has some uncertainty, and gold will benefit from this.“
Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for support in gold to hold with crude oil strong, the U.S. dollar retracing and geopolitical uncertainties. As of when he spoke, the 50-day moving average for June gold was at $1,036.30, the 20-day was at $1,038 and the 10-day was at $1,040.50.
Meanwhile, Kevin Grady, president of Phoenix Futures and Options LLC, sees potential for gold to fall back further on more long-liquidation selling.
He pointed out that the number of open positions rose Wednesday by some 32,000 lots, meaning fresh buying. Then preliminary data shows a 15,000 decline during a price pullback Thursday. For now, many of the fresh longs (bullish traders) are staying in the market, probably in case of a U.S. missile strike on Syria, Grady said.
However, “if you do not see any missile strikes this weekend and the stocks stay high, gold will sell off on Monday,” Grady concludes.
Ken Morrison, editor of the newsletter Morrison on the Markets, also sees a pullback.
“The midweek rally on high volume, responding to U.S. threats of military action in Syria, was accompanied by a surge of new money into gold,” he said. “But the apparent easing of tensions combined with a quick rejection at the January and February twin peak highs saw much of that money come out of gold yesterday. Without a new catalyst to take out overhead resistance at $1,370, I expect gold to drift lower but still maintain some political-risk premium. There's minor trendline support at $1,330 that I expect is tested in the week ahead.”